* Singapore widens trading band for Singapore dollar
* Euro rises above $1.4100, highest in more than 8 months
* Aussie flirts with parity, dollar index hits 2010 low
(Updates prices, adds comment, details)
NEW YORK, Oct 14 (Reuters) - The U.S. dollar slumped to a
2010 low against a basket of currencies on Thursday after
Singapore let its currency rise but analysts saw increasing
chances of a dollar rebound with negative sentiment so high.
The Australian dollar, which boasts the highest yield among
major currencies, soared to its strongest since the currency
was floated in 1983 as investors dumped the U.S. dollar on
expectations the Federal Reserve would start printing money
with further quantitative easing as soon as next month.
Singapore's central bank widened the trading band in which
it maintains the Singapore dollar <SGD=> <SGD=D4>, propelling
it to a record high. Singapore is experiencing rising inflation
and the move was seen as a tightening of policy -- the opposite
of what the U.S. Federal Reserve is expected to do.
The Chinese yuan <CNY=CFXS> hit its highest close against
the U.S. dollar since July 2005. For more see [].
"Singapore is often seen as a bellwether for the rest of
the Asian currencies," said Firas Askari, head of FX trading at
BMO Capital Markets in Toronto. "It opens the way for the
region to have currency gains (against the U.S. dollar)."
The dollar index <.DXY>, which tumbled to its weakest since
December, is on course for a test of trendline support at
75.95, with its November low of 74.17 then not far away. The
75.95 target is the trendline from two major lows in July 2008
and in November 2009. CMC Markets places support after 74.17 at
70.70, the low from March 2008.
The dollar index was last down 0.6 percent at 76.599.
The euro <EUR=> surged to a more than eight-month high of
$1.4123 on trading platform EBS <EUR=EBS> and faces near-term
resistance at $1.4195, the Jan. 25 high. Traders said the euro
still has room to go, with strong resistance not seen until
$1.45. The pair was last at $1.4062, up 0.7 percent.
After the euro failed to crack $1.40 the previous session,
the currency's moves caught some players by surprise as they
had been expecting more consolidation. It triggered stops
around $1.4030 and then $1.4050 in Asia and subsequently
cracked the $1.41 handle in Europe.
While a short-term consolidation may still be on the cards,
CitiFX says it still sees the pair making a run at $1.4360-70
and then $1.4720.
The Aussie dollar last traded at US$0.9924 <AUD=>, up 0.2
percent, with traders saying option barriers at $1.0000 were
slowing the rally. It has gained about 11 percent this year and
is up more than 20 percent from a low in May.
The options market suggests the recent upward momentum in
the Aussie dollar has further to run. []
DOLLAR BOUNCE?
Dollar selling accelerated after the release of Federal
Reserve meeting minutes this week showed policy makers were
considering more measures to stimulate the economy, including
adopting a price-level target or buying more bonds.
Investors will closely watch a speech by Fed Chairman Ben
Bernanke on Friday which could provide hints on what the U.S.
central bank might do at its next policy meeting on Nov. 2-3.
Lee Hardman, currency economist at The Bank of
Tokyo-Mitsubishi UFJ in London, said dollar pessimism, judged
by many metrics, is now at "historically extreme levels
signaling an elevated risk of a sharp correction higher for the
dollar when dollar selling has reached a crescendo."
"At the end of the day, when everybody is on the boat and
everybody is doing the same ..., it doesn't take much to make
the boat go the other way," BMO Capital's Askari said.
The dollar could see a rebound if the Fed announces asset
purchases of less than $1 trillion after its meeting in
November, which would disappoint some market participants
hoping for a bigger move and ease concerns about a debasement
of the U.S. currency.
Jack Spitz, managing director of foreign exchange at
National Bank of Canada in Toronto, said with the market
already pricing in Fed easing, the dollar could rise after the
Fed meeting in a "sell the rumor, buy the fact" reaction.
The dollar also hit the latest in a succession of record
lows against the Swiss franc <CHF=> and slid below parity with
the Canadian dollar <CAD=>, a level not seen since April.
The greenback fell to a 15-year low of 80.88 yen <JPY=> on
EBS, despite wariness about Japanese intervention, and looked
set to challenge its record low of 79.75 hit in April 1995.
While traders think the Bank of Japan could intervene at
any moment to keep the yen in check, some market participants
speculated that Tokyo may prefer to avoid intervention ahead of
G20 meetings in South Korea in October and November.
(Reporting by Nick Olivari and Wanfeng Zhou; Additional
reporting by Neal Armstrong in London; Editing by James
Dalgleish)
